Last year Minden Company introduced a new product and sold 25, 200 units of it at a price of$93 per unit. The product's variable expenses are $63 per unit and its fixed expenses are $832,500 per year. 3. Assume the company has conducted a marketing study that estimates itcan increase annual sales of this product by 5,000 units for each $2 reduction in its sellingprice. If the company will only consider price reductions in increments of $2 (e.g., $68, $66,etc.), what is the maximum annual profit that it can earn on this product? What sales volumeand selling price per unit generate the maximum profit? 4. What would be the break- evenpoint in unit sales and in dollar sales using the selling price that you determined inrequirement 3 ?

Vreak-even point refers to the point at which the sale price equal to the purchase price results in…

Answered: Last year Minden Company introduced a…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 9EB: Baghdad Company produces a single product. They have recently received the result of a market survey...

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Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?
Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000
Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs per gas grill are 225, and the average price per gas grill is 600. Required: 1. How many gas grills must Gelbart Company sell to break even? 2. If Gelbart Company sells 46,775 gas grills in a year, what is the operating income? 3. If Gelbart Companys variable costs increase to 240 per grill while the price and fixed costs remain unchanged, what is the new break-even point?
Deuce Sporting Goods manufactures a high-end model tennis racket. The company’s forecasted income statement for the year, before any special orders, is as follows: Fixed costs included in the forecasted income statement are $400,000 in manufacturing cost of goods sold and $200,000 in selling expenses. A new client placed a special order with Deuce, offering to buy 1,000 tennis rackets for $100.00 each. The company will incur no additional selling expenses if it accepts the special order. Assuming that Deuce has sufficient capacity to manufacture 1,000 more tennis rackets, by what amount would differential income increase (decrease) as a result of accepting the special order? (Hint: First compute the variable cost per unit relevant to this decision.)
Keleher Industries manufactures pet doors and sells them directly to the consumer via their web site. The marketing manager believes that if the company invests in new software, they will increase their sales by 10%. The new software will increase fixed costs by $400 per month. Prepare a forecasted contribution margin income statement for Keleher Industries reflecting the new software cost and associated increase in sales. The previous annual statement is as follows:
Marchete Company produces a single product. They have recently received the results of a market survey that indicates that they can increase the retail price of their product by 8% without losing customers or market share. All other costs will remain unchanged. Their most recent CVP analysis is shown. If they enact the 8% price increase, what will be their new break-even point in units and dollars?
Baghdad Company produces a single product. They have recently received the result of a market survey that indicates that they can increase the retail price of their product by 10% without losing customers or market share. All other costs will remain unchanged. If they enact the 10% price increase, what will be their new break-even point in units and dollars? Their most recent CVP analysis is:
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $95 per unit, and variable expenses are $65 per unit. Fixed expenses are $835,800 per year. The present annual sales volume (at the $95 selling price) is 25,900 units. 3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit? 4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $99 per unit, and variable expenses are $69 per unit. Fixed expenses are $837,300 per year. The present annual sales volume (at the $99 selling price) is 25,400 units. Required: 1. What is the present yearly net operating income or loss? 2. What is the present break-even point in unit sales and in dollar sales? 3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit? 4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)?
Last year Minden Company introduced a new product and sold 15,000 units at a price of $74 per unit. The product's variable expenses are S44 per unit and its fixed expenses are $521,400 per year. Required: What was this product's net operating income (loss) last year? What is the product's break-even point in unit sales and dollar sales? Assume the company conducted a marketing study that estimates it can increase annual sales of this product by 5,000 units for each $2 reduction in its selling price. If the company will only consider price reductions in increments of $2 (e.g., S72, S70, etc.), what is the maximum annual profit it can earn on this product? What sales volume and selling price per unit generate the maximum profit? What would be the break-even point in unit sales and dollar sales using the selling price you calculated in requirement 37
Minden Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $2 reduction in the selling price. The company’s present selling price is $70 per unit, and variable expenses are $40 per unit. Fixed expenses are $540,000 per year. The present annual sales volume (at the $70 selling price) is 15,000 units. 3. Assuming that the marketing studies are correct, what is the maximum annual profit that the company can earn? At how many units and at what selling price per unit would the company generate this profit?4. What would be the break-even point in unit sales and in dollar sales using the selling price you determined in (3) above (e.g., the selling price at the level of maximum profits)? Why is this break-even point different from the break-even point you computed in (2) above?
R. Fong Company introduced a new product last year for which it is trying to find an optimal selling price. Marketing studies suggest that the company can increase sales by 5,000 units for each $ 2 reduction in the selling price. The company's present selling price is $ 70 per unit, and variable expenses are $ 40 per unit. Fixed expenses are $ 540,000 per year. The present annual sales volume (at the $70 selling price) is 15,000 units. Assuming that the marketing studies are correct, what will be the optimal selling price that will give the maximum profit for the company? the optimal selling price is set, how many units are expected to be sold?

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